Palantir Technology's (PLTR -3.18%) recovery from its post-IPO (initial public offering) slump has been nothing short of incredible. After an initial warm reception, shares of the company slid more than 80% from their high in early 2021. Macro forces were at play -- no tech company escaped 2022 unscathed -- but investors had significant concerns about the company's ability to turn a profit, and its stock was hit hard.

Today, Palantir is in a very different place. Not only has it proven it can turn a very healthy profit, but the company is delivering consistent, double-digit revenue growth, quarter after quarter.

Investors like what they see. Palantir's stock is up more than 1,100% in the last two years alone. With all the excitement, can investing in Palantir help you retire a millionaire?

Palantir is showing just how useful AI can be

With all of Silicon Valley's promises, the sky-high stock valuations, and the gargantuan artificial intelligence (AI)-infrastructure spending sprees, many investors feel the technology is in a "show me" stage -- that is, they need the real-world value of AI to be made very clear, very soon. Palantir is doing just that.

The company, named for the "seeing stones" of Tolkien's Lord of the Rings, is an intelligence company that uses AI to help users "see" through the noise. Its software helps make sense out of massive sets of data, allowing its users to gain critical insights that traditional methods might miss.

Palantir's products are incredibly adaptable and can be helpful almost universally. That means the company has an extremely diverse set of clients across government and commerce. Its software helped the CIA identify hidden cyber-espionage networks, the NHS make sense of the spread of COVID-19, and Ferrari's Formula One team win races.

This utility means the company's services are very much in demand, especially domestically. Palantir's U.S. commercial sales grew 54% year over year, while its U.S. government sales grew 40% year over year. Behind these two major areas of expansion, Palantir delivered 30% year-over-year revenue growth overall.

At the same time, Palantir grew its net margins by more than 50% and doubled its earnings per share (EPS) year over year.

Beware of Palantir's valuation

Palantir is executing at an extraordinary level. However, there's one major issue -- valuation. While the company's ability to grow its customer base and total sales while reducing costs at this scale would generally be an investor's dream, the market has set too high a bar that, even a company as competent as Palantir, will struggle to meet.

Palantir currently carries a price-to-earnings ratio (P/E) of 376, which is an extyremely high premium. The biggest players in tech, like Alphabet and Microsoft, carry P/Es of roughly 30.

Admittedly, these are mature companies and don't exactly provide an apples-to-apples comparison, but even if you look at more direct competitors in high-growth mode, Palantir's 376 is still in its own league. ServiceNow, for instance, carries a P/E of 166 -- still incredibly high but less than half of Palantir's.

Here's an example. If, by 2035, Palantir carries a generous P/E of 60 -- assuming it roughly maintains its current net margins, which are on target for software-as-a-service (SaaS) providers -- it would need to maintain its current growth rate of 30% without fail for the next 10 years just to have its stock match the broader market's historical average annual return of 10%. In other words, the company has to perform extraordinarily well, just for its stock to perform ordinarily. I don't like that math.

Yes, I made some assumptions that might not hold true, and Palantir could outperform some of them. However, I also assumed the stock would carry a P/E ratio twice that of current blue-chip tech companies, and that's a very generous assumption, so it's not hard to see a scenario in which Palantir's stock struggles to keep up with the broader market.

Do I think Palantir can help you retire as a millionaire? Not at the moment. This stock is just too expensive. Keep an eye on it, though. If it comes down meaningfully, it could be a great addition to a well-diversified portfolio.